How to Plan For Expected Changes in the Estate Tax

Your Florida estate plan is critical to your health and well-being. Beyond what you need, however, a strong estate plan can protect your family, create your legacy, and ensure that everything you have worked for is protected. When you work with an experienced Florida estate planning attorney you can ensure that your estate plan will protect you now, and well into the future.

Unfortunately, both state and federal laws can change over time. Have you heard of the proposed changes in the works for the federal estate tax? While Florida has no state death tax, the federal law does, and Florida residents can be subject to it. Some of the changes on the horizon include a significant reduction in the federal estate tax exemption amount as well as a major curtailment of advanced estate tax planning techniques, which can reduce estate tax and historically have been very effective in doing so. With the lowered exemption amount, more Americans should be aware of the potential tax consequences their estates may be on the hook for. Further, Florida residents who own real property or assets in other states need to keep abreast of all potential changes that could financially impact them.

Changes to the tax code are just one of the reasons why it is important for you to have a trusted attorney on your side. Your Florida estate planning attorney has special knowledge on these issues and can monitor your unique situation to ensure that you are protected under all circumstances. In order to plan for these changes accordingly as we monitor their implementation, let us take a look at some tips to help you prepare.

First, some of the best ways to plan for a lowered estate tax exemption amount involve taking steps to lower the value of a taxable estate sooner rather than later. There may be a variety of ways to do this. A lifetime gift, for instance, may be an option. If you have plans to leave an inheritance to a loved one once you pass away, you may want to consider making the gift now. The gifted amount will be removed from your taxable estate. You could also consider making a charitable gift while you are living as this would have the same impact of removing the gift amount from your taxable estate.

Second, think beyond a “simple” will. While there are no “simple” estate plans, using a last will and testament cannot accomplish the same tax protection that a trust agreement can. Not only does a trust agreement offer planning flexibility in death, it can be used in life as well. Further, it can be beneficial as a tool to more easily manage out of state real property that might otherwise require a probate proceeding to transfer to the intended beneficiary.

Third, we want to explore the nuances of trust planning beyond probate avoidance. Trusts can be valuable tools, when properly implemented, in reducing the amount of your taxable estate. Consider a SLAT, for example. A SLAT, or Spousal Lifetime Access Trust, is an irrevocable trust that one spouse creates for the benefit of the other spouse. In addition to the benefit that the beneficiary spouse receives distributions from the SLAT during his or her lifetime, there is also the benefit that the assets held in the trust will not be included in the taxable estate for either spouse.

For further assistance navigating the proposed federal estate tax changes, our office is here to help. Please contact us to schedule an appointment.